SanDisk (SNDK) 11/10/09 PriceWatch Alert With 24.06% Downside Protection

Posted: Tuesday, November 10, 2009 8:11 AM EDT
By: Market Intelligence Center Staff

SanDisk (NasdaqNM: SNDK) closed yesterday at $21.82. So far the stock has hit a 52-week low of $5.07 and 52-week high of $24.61. SanDisk stock has been showing support around 20.54 and resistance in the 22.58 range. Technical indicators for the stock are Bullish and S&P gives SNDK a neutral 3 STAR (out of 5) hold rating. SNDK appears on the Investors Observer Volume Leaders list. For a hedged play on this stock, look at an Apr '10 18 covered call (SWQ DJ) for a net debit in the $16.57 area. That is also the break even stock price for this trade. This covered call has a 158 day duration, provides 24.06% downside protection and an 8.63% assigned return rate for a 19.94% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the SNDK Jan '11 7.50 Call (OWS AU) and selling the Apr '10 18 call (SWQ DJ) for a $9.30 debit. The trade has a 158 day life and would provide 23.01% downside protection and a 12.90% assigned return rate for a 30.00% annualized return rate (for comparison purposes only). SanDisk does not pay dividends at this time. [ATU-Seven Summits Research]